Stocks Slip After Retail Sales Data

By JACK HEALY and DAVID JOLLY
The New York Times
Published: Jan 09, 2009

Leftover gloom from the holidays, in the form of bleak sales reports from America’s retailers, dragged down stock markets on Thursday.

A day after suffering their worst losses in more than a month, stock markets headed lower for a second day as retail stores detailed the toll from one of the worst holiday shopping seasons in years. Even Wal-mart, whose low prices gave it an edge over other retailers, cut its earnings outlook for the fourth quarter.

Shares of Wal-Mart, the world’s largest retailer, dropped 8 percent after the company reported a 1.7 percent increase in December sales at stores open at least a year, less than analysts’ expectations.

A range of retailers reported drops for December, including the discounters Target and Costco, Macy’s, Limited Brands and Abercrombie and Fitch.

At about 10:30, the Dow Jones industrial average was down 80 points, while the broader Standard & Poor’s 500-stock index fell 0.6 percent. The tech-heavy Nasdaq was down less, by 0.4 percent.

A drop in first-time unemployment claims softened the blow from the grim retail numbers. The Labor Department reported that jobless claims fell by 24,000 to 467,000 last week, but economists said they were still bracing for massive job losses when the government reports December unemployment numbers on Friday.

Crude oil continued its decline on Thursday, falling 71 cents to $41.90 a barrel. Oil fell $5.95 a barrel on Wednesday on reports of increased inventories in the United States.

In Europe and Asia, stocks fell after profit warnings from major technology companies and continued economic gloom in Europe.

Stimulus measures announced around the world in the last three months are not expected to lift growth until the second half of this year at the earliest, and investors are only now beginning to get concrete data on the damage corporate profits suffered as consumer confidence crashed in the last quarter of 2008.

A euro zone survey found economic confidence in the 16 countries that share the currency fell in December to the lowest on record. And the German Federal Statistics Office reported Thursday that exports from Germany slumped in November by 10.6 percent from October — a record decline — amid a worsening global recession. Economists had been expecting a decline of about 3 percent.

Jörg Kraemer, chief economist at Commerzbank in Frankfurt, said in a research note that the “dramatic decline in exports” appeared to have been broad, giving ammunition to officials of the European Central Bank who want to cut euro zone interest rates by half a percentage point next week from the current 2.5 percent.

The Bank of England, the British central bank, cut its key rate to 1.5 percent on Thursday, the lowest rate since the bank was founded in 1694.

In afternoon trading, all of the major markets in Europe were down about 2 percent.

On Wednesday, the Standard & Poor’s 500 index fell 3 percent, after Intel, the giant chipmaker, reported a 23-percent decline in fourth-quarter sales, and EMC, the world’s biggest maker of data storage equipment for businesses, said it planned to cut 2,400 jobs, or 6 percent of its staff.

On Thursday, Dell, the giant computer maker, and Lenovo, the Chinese company that acquired I.B.M’s PC business in 2005, added to the technology-sector gloom. Dell said it would cut 1,900 of the 3,000 jobs at its Limerick, Ireland facility as it moves this year to concentrate all regional production in Poland.

Lenovo said it would record a loss for the October-December quarter and cut 2,500 jobs, or 11 percent of its work force, and reduce executive compensation by 30 percent to 50 percent to save $300 million a year. Also on Thursday, Promos Technologies, a Taiwanese chip maker, and its Japanese counterpart, Elpida Memory, jointly submitted a proposal to the Taiwanese government for state assistance.

In Asian trading, the Tokyo benchmark Nikkei 225 stock average dropped 3.9 percent, while the S&P/ASX 200 in Sydney fell 2.3 percent. The Hang Seng index in Hong Kong lost 3.8 percent, while the Shanghai Stock Exchange composite index fell 2.4 percent. India, where the Bombay Sensex 30 slumped 7.3 percent on Wednesday after the disclosure of an accounting scandal at Satyam Computer, was closed for a holiday.

In Australia, the Macquarie Group said market conditions during the past three months had been “exceptionally challenging for almost all Macquarie’s businesses, adversely impacting levels of business activity and profitability.” The financial company’s shares fell 5.8 percent.

South Korea, which has already announced a string of measures, plans to provide an additional 50 trillion won ($38 billion) in loans and credit guarantees to smaller companies. President Lee Myung-bak, who last week pledged the government would go into “emergency” mode, held the first of what are to be regular economic crisis meetings with top policy officials, and urged banks to increase lending. South Korea’s central bank, meanwhile, is widely expected to lower interest rates Friday. Taiwan and Indonesia both lowered rates on Wednesday.

In Japan, where interest rates are already close to zero, the governor of the Bank of Japan, Masaaki Shirakawa, said the central bank could do more to stabilize financial markets, and that its move to buy commercial paper was a helping to improve conditions.

Bettina Wassener contributed reporting.

© The New York Times. All rights reserved. This article originally appeared in The New York Times.